Pharmacy tied to fungal meningitis outbreak files for bankruptcy

The compounding pharmacy blamed for 620 infections and 39 deaths in an outbreak of fungal meningitis and other infections caused by contaminated drugs filed for bankruptcy Friday, and pledged to establish a fund to compensate victims.

The New England Compounding Center of Framingham, Mass., faces more than 400 lawsuits from patients who received epidural steroid injections later found to be tainted with fungus linked to serious and lethal infections, records showed.

The company filed for Chapter 11 bankruptcy protection in the Massachusetts district bankruptcy court.

In a statement issued late Friday, the company said the goal of the bankruptcy is to provide a "greater, quicker, fairer payout" to creditors than could be achieved through "piecemeal" litigation.

NECC also announced the appointment of Keith D. Lowey as the firm's independent director and chief restructuring officer. He will supervise the restructuring and be responsible for establishing NECC's effort to create a compensation fund. NECC's bankruptcy counsel, Daniel Cohn, said that claimants and their lawyers will be "actively involved" in the compensation process, according to the statement.

"Many families across the U.S. have been impacted by this great tragedy, and it is difficult to comprehend the sense of loss so many people have experienced," Lowey said in a statement. "Everyone associated with the New England Compounding Center shares that sense of loss."

Elizabeth A. Kaveny, a lawyer who represents five clients, all in Michigan, who said they were sickened by contaminated shots, says the company's action is no guarantee of justice for the alleged victims.

"NECC gets no bonus points for establishing a 'victims' compensation fund' after victimizing hundreds of patients in our country," she said in a statement to NBC News. "It is an obvious and necessary step of a bankruptcy proceeding and all victims need to be compensated. While NECC clearly should declare bankruptcy and never be permitted to reopen its doors, we have significant questions as to why this is a Chapter 11 bankruptcy, what funds are available for NECC's victims and how the victims' claims will be evaluated."

Problems with three lots of NECC steroids injected into some 14,000 people in 23 states were first detected in September. The company was shuttered in October after federal inspectors found widespread evidence of contamination throughout the pharmacy, some dating back to January.

The firm was licensed as a compounding pharmacy and was supposed to be mixing medications to order on prescription-by-prescription basis. However, investigations have shown the firm worked on a much larger scale and evaded several run-ins with the Food and Drug Administration and state regulators over the size of its operation and previous cases of contamination.

The illnesses and deaths -- which include not only fungal meningitis, but strokes, joint infections and spinal infections -- have prompted new demands to overhaul the way that compounding pharmacies are regulated in the U.S.